May 12 (Bloomberg) -- Brazilian President Luiz Inacio Lula da Silva will cut taxes for 25 favored industries and offer companies in those sectors billions of dollars in government loans to help spur exports hurt by the appreciating currency.

Unveiling a new industrial policy today in Brasilia, Lula said the government will use windfalls from biofuels and food to cut Brazil's dependence on commodity exports for foreign exchange. The plan will boost investment to 21 percent of gross domestic product by 2010 from about 17.6 percent last year by ending various taxes and cutting red-tape for smaller companies.

``This puts an end to 25 years of investment apathy,'' Lula told Cabinet ministers, businessmen and workers gathered at state bank Banco Nacional de Desenvolvimento Economico e Social's headquarters in Rio de Janeiro. ``This kickstarts a new cycle of growth for our nation.''

The plan, dubbed the Productive Development Policy Package, marks Lula's most ambitious push yet to ease Brazil's dependence on iron ore and soybean exports by increasing sales abroad of value-added goods such as software and cosmetics. It also signals a stepped up role for the government in cultivating favored industries through lower taxes and cheaper loans.

`Agent of Development'

``All this effort will mean nothing without constant communication between the government and companies,'' said Luciano Coutinho, president of the Banco de Desenvolvimento Economico e Social, the development bank. ``The state is assuming its responsibility as an agent of development.''

The government will offer more than 21.4 billion reais ($12.8 billion) worth of tax cuts and 10 times that to finance new machinery and infrastructure over the next three years, Industry and Trade Minister Miguel Jorge said.

The government's proposed $20 billion sovereign wealth fund, unveiled last week, will be used as part of the plan to help bolster growth of Brazilian companies overseas, Finance Minister Guido Mantega said.

Faster economic growth coupled with a currency rally has spurred demand for imported goods and discouraged exports, reducing the trade surplus. Under the plan exports are forecast to rise to $208 billion by 2011.

``We need to invest more and better,'' Jorge said today in Rio de Janeiro. ``Investing better is nothing but taking a big leap in terms of the quality of our industrial matrix.''

`Competitive'

Increased capital spending, at reduced rates with lower taxes, should allow Brazilian companies to make their consumer electronics, defense material, software and medicines ``competitive'' again in overseas markets as the real continues to appreciate against the dollar, officials including Coutinho said.

Manufacturing represents about 35 percent of the nation's $1.2 trillion economy, according to the statistics agency.

``Ideally, we would have liked measures that are less sector-focused and instead broader to benefit the economy as a whole,'' Dan Ioschpe, chief executive officer of Iochpe-Maxion SA, Brazil's largest maker of railroad freight cars, said on Bloomberg Television.

Under the plan, the government may create incentives for companies' research and development spending to the equivalent of 0.64 percent of GDP in three years, from less than 0.5 percent now, Jorge said.

Brazil aims to award over 20 billion reais in tax exemptions and spend 40 billion reais on technology by 2010, Jorge said. Among the 25 industries chosen for the plan are agribusiness, nanotechnology, biotechnology, biodiesel, perfume and oil and gas.

Coutinho said the bank will pledge up to 210 billion reais in loans for the plan, without elaborating.

To contact the reporters on this story: Guillermo Parra-Bernal in Sao Paulo at gparra@bloomberg.netKatia Cortes in Brasilia at at kcortes@bloomberg.net

Last Updated: May 12, 2008 15:06 EDT